Water Marketing Strategies & The Utah Water Banking Act
Utah is facing existential challenges requiring an “all hands-on deck” approach to water. The term “water marketing” encompasses all forms of water exchanges between users. Water leasing is a commonly used form of water marketing and represents a local, voluntary and temporary Exchange of water. Water banking is one kind of water marketing tool focused on facilitating water leases between users. The Utah Water Banking Act is a relatively new method of creating water banks in the state of Utah. Water marketing arrangements of all kinds are flexible win-win tools that can generate income for water right owners, bring stability and order to local water systems and increase access to water.
For the last three years, the project team of Clyde Snow & Sessions, WestWater Research, HDR and GovFriend have been working diligently with state agency staff, interested stakeholders and local water users to pilot the Water Banking Act and complete a Statewide Water Marketing Strategies Report. Starting to explore water marketing activities can be overwhelming. Based on stakeholder experiences, the project team has identified five key Marketing Milestones needed to navigate water marketing.
Based on stakeholder experiences exploring water marketing strategies and the Utah Water Banking Act, the state of Utah is providing resources to help water users navigate the five key milestones to successful water marketing:
- PEOPLE: Engage participants and ask the right questions.
- MARKETS: Assess local water supply and demand needs.
- LOGISTICS: Analyze feasible water delivery options, physical water distribution and legal considerations.
- TRANSACTIONS: Negotiate water leasing arrangements.
- APPROVALS: Identify and prepare approvals.
The project team is excited about the effort to date and will be presenting its findings in public meetings throughout the spring of 2023, releasing a DRAFT Statewide Water Marketing Strategies Report in summer 2023, and releasing a final report in early fall 2023. Information will be updated as materials become ready for public use, review and comment.
DYNAMIC TOOLS FOR A RESILIENT FUTURE
The concepts and investments made over the last several years have proved to be incredibly prescient for the needs of 2023. The tools and lessons learned will help Utah more quickly meet a variety of statewide water policy goals. Answering foundational questions is the first step in developing a water marketing solution.
Background & Act
In 2020, with near unanimous support, the Utah Legislature passed the Utah Water Banking Act (SB 26) – now Utah Code 73-31. The passage of the Water Banking Act was a bipartisan effort spearheaded by Senator Jani Iwamoto and former Representative Tim Hawkes. The effort precipitated and exemplified the need for Utah Legislators to work across the aisle to find creative water solutions.
LAYING THE TRACKS
In 2017, as a result of a bill sponsored by Senator Jani Iwamoto SB 214 Public Water Supplier Amendments on instream flows, a diverse stakeholder group began to meet to develop a Utah water banking concept and legislation. The stakeholder group, one of the first of its kind and told by many to be one of the most effective to date, ended up totaling over 70 people and including representatives from agriculture, public water suppliers, conservation groups and other interests. Open to anyone, this inclusive stakeholder group spent thousands of hours discussing marketing concepts, studying existing activities in the various basins in Utah, reviewing water banking programs in other western states and receiving public feedback.
Water Marketing Stakeholder Working Group
Jordan River Commission
Strawberry High Line Canal Co.
Utah Division of Water Resources
Bear Lake Watch
Mabey Wright & James
Strawberry Water Users Association
Utah Division of Water Rights
Bear River Canal Co.
Ogden City Corporation
The Nature Conservancy
Utah Legislative Research & General Counsel
Cache Water District
Utah State House
Central Utah Conservancy District
Parsons Behle & Latimer
U.S. Bureau of Reclamation
Utah State Senate
Clyde Snow & Sessions
Provo River Water Users Association
U.S. Fish and Wildlife Service
Utah State University
Rural Water Technology Alliance
United Diesel Service
Weber Basin Conservancy District
FRIENDS of Great Salt Lake
Salt Lake City Public Utilities
Utah Attorney General
White City Water Improvement District
Snow Christensen & Martineau Law
Utah Department of Agriculture & Food
Smith Hartvigsen, PLLC
Utah Department of Natural Resources
Snyderville Basin Water Reclamation District
Utah Division of Water Quality
To support these efforts, in 2019, with Representative Stewart Barlow as the House/Floor sponsor, Senator Jani Iwamoto sponsored SJR 1 endorsing the continued study of water banking, authorizing a one-time $400,000 appropriation, and promoting the effort to secure an additional $400,000 in funding from the Bureau of Reclamation WaterSMART Water Marketing Grant program. The money funded a project team to oversee a three-year project to pilot the Water Banking Act and develop a statewide water marketing strategy for Utah.
UTAH WATER BANKING ACT
Based on their findings, in 2019 and 2020 the stakeholder group put pen to paper and drafted the Utah Water Banking Act. The act represents the “Utah Way” by focusing on bottom-up interest in water marketing and putting Utah water users in the driver’s seat of local water marketing activities. By starting at the local level, water users can design a water lease that suits local interests and conditions. For example, local water users determine the form of lease, lease terms, pricing structure, water rights subject to the lease, etc.
The act recognizes two forms of leasing arrangements:
- Contract Water Bank: Utah Code 73-31-301 et seq.
Water leasing contracts are voluntary arrangements that outline the terms and conditions for the use of water between a discrete set of parties. Many water users in Utah already use contracts as a means to lease water. Depending on location and conditions, contracts are likely to be the primary means for organizing future water market transactions in Utah. Water leasing contracts that meet the criteria of the act are eligible to apply to be a contract water bank.
To prevent private speculation of water, the applicant for a contract water bank must be a non-federal public entity: other parties to the contract do not need to be public entities.
- Statutory Water Bank: Utah Code 73-31-201 et seq.
A statutory water bank is a legal entity organized for the purpose of administering and facilitating water leasing between multiple parties in a defined area. Statutory water banks are modeled after private irrigation companies and run on private governance documents such as articles, bylaws, or other organizational documents.
The applicant for a statutory water bank must be the owner of a perfected water right. Participation in an approved statutory water bank, either by depositing water rights into or leasing water out of, must be open to all interested water users.
Once approved, participants in a Utah water bank are extended certain benefits and protections. In particular, water rights deposited into a water bank are exempt from forfeiture, water rights can be leased for environmental purposes and water banks are subject to a streamlined change application proceeding that provides participants greater flexibility.
An overview of the report is now available; check back for the full report soon.
Statewide Water Marketing Strategies
Based on Stakeholder experiences, the Project Team has summarized and organized common water marketing principles water users can employ to reach their goals. This information is intended to both inform water users about key background concepts but also provide specific information about the kinds of water marketing transactions as well as the marketing methods.
Exploring water marketing requires water users to assess the best fit marketing method for their uses.
Generally this will require water users to choose a Water Marketing Transaction Type and Marketing Method.
|TRANSACTION TYPE:||MARKETING METHOD:|
|The terms and conditions the parties agree to satisfy and execute a transfer of water between the parties.||The platform or structure used to bring together willing lessors/buyers and willing lessees/sellers.|
Water Marketing Transaction Types
Water Marketing Method
Reverse Auction (RFP Process)
Utah Contract Water Bank
Utah Statutory Water Bank
Agricultural Conservation Project / Program
Overview & Pilot Summaries
The Statewide Water Marketing Strategies grant application identified pilot project areas to explore implementing the Utah Water Banking Act and water marketing alternatives. Lessons learned in these pilot areas are to be reflected in the overall Statewide Water Marketing Strategies Report. The pilot projects were identified early in the process based on local stakeholder interest.
Two-Party Late Season Lease Pool Contract
Snyderville / East Canyon Creek:
First Water Bank of Utah (Statutory Water Bank)
Background. The Cache Water District identified water marketing strategies as a potential tool to address local issues such as inadequate late-season irrigation water, growth within ditch systems, and scattered water owners. The district was interested in coordinating meetings to explore water banking and water marketing alternatives.
Background. Two environmental NGOs have been actively developing water leasing projects in the Price River Basin to benefit instream flows. The NGOs had previously partnered with the Carbon Canal Co. and its shareholders on several projects. They wanted to test the water banking structure as a new means of securing instream flows.
Background. Various stakeholders, including environmental NGOs, a municipal sewer district, and local municipalities wanted to use water banking to improve instream flows in East Canyon Creek during critical low flows in late summer.
Background. Various stakeholders in the Uintah Basin wanted increased ability to conserve and improve delivery of water. The desert climate and basin’s unique topography required a comprehensive water management strategy.
- Shop for Best Fit: Consider multiple water marketing methods when addressing a local water need; identify which methods best address the needs of the local participants.
- Be Clear on Purpose: Defining the needs of water users should come first. Local conditions will dictate the form of and participation in water banks.
- Someone Needs to Lead: Having an engaged and local champion is invaluable in setting up water markets.
- People Want to Know: Outreach and education are critical and might require significant resources. Stakeholder engagement should be early and often.
- Welcome Support: Resources from state agencies are available and grant funding may be available to support setting up a water bank.
- Is it Worth the Effort? The effectiveness and return on investment of a Utah Water Bank should be monitored and compared to other transaction mechanisms.
- Pick the Easy Route: Establishing a lease program or local market is significantly streamlined if the source water rights have flexibility in use and formal change applications do not have to be filed with state agencies.
- Large Group Consensus is Challenging: The success and speed of negotiations can be improved by empowering a limited number of representatives to negotiate on behalf of contracting parties.
- Don’t Study it to Death: Technical studies are important to understand water bank operations and useful when seeking regulatory approval. However “analysis-paralysis” should be avoided.
- Have Fun: Water is complicated and can be contentious. Try to foster an environment of creativity and community in your discussions. Approach the task as a group effort looking to address common challenges.
The Utah Water Banking Act recognizes two forms of leasing arrangements eligible to be approved by the Utah Board of Water Resources and a Utah water bank: a contract water bank and a statutory water bank. The board makes a substantive review of each application but approves all applications that are deemed complete. Once approved, there are annual reporting requirements to the board.
Please follow the guidelines provided for each type of application as you complete it. Additional resources to assist in your application are provided as well.
|CONTRACT WATER BANK MATERIALS||STATUTORY WATER BANK MATERIALS|
Utah has limited water to meet growing demand. Water users constantly face many challenging and changing conditions. To navigate uncertainty, water users need tools that bring flexibility and stability to their operations.
To address these challenges, activities to buy and sell or lease water are increasing across the West. With high demand for water, local communities are concerned about maintaining control over the terms and conditions of these activities.
The Water Banking Act is a stakeholder effort to facilitate the development of water market activity that is locally controlled, temporary in nature and always voluntary. The act addresses several barriers impeding more flexible water use and extends benefits requested by the water user community. The act will be used by, and be for the benefit of, local water users.
The act resulted from a three-year effort and reflects collaboration and feedback from multiple water interests. It is exploratory and water users will have an initial 10 year window to test the act before it sunsets in 2030. At that time, the act can be extended, modified or allowed to lapse.
The water banking project team, discussed below, is here to assist local water users explore the act and implement a water bank where desired. The project team is solely interested in learning about how the act functions in practice and whether it can be of use to local water users. All efforts are intended to be responsive to local interest and requests.
The Water Banking Act (Utah Code 73-31) promotes temporary, voluntary and locally directed leasing arrangements for the use of water rights. Leasing arrangements retain local ownership of water rights, create income and provide expanded water access.
The act provides water users ultimate flexibility to design a leasing arrangement that meets local conditions. Local water users can determine the size and scale of a bank’s service area, which water rights participate, lease prices, lease terms, conditions for leasing, distribution of proceeds, etc..
- Streamlined administrative process: Once water rights are approved to be deposited in a water bank, no additional Change Applications or state approvals are needed to move water to a new use within the approved service area. This is intended to facilitate quicker and cheaper movement of water on a temporary basis.
- Forfeiture: Water rights approved to be deposited in a water bank are exempt from beneficial use requirements and protected from forfeiture.
- Environmental/Instream-Flows: Banked water can be leased for any purpose authorized by the act, including instream flows.
- Condemnation Protections: Banked water is shielded from any condemnation procedures while in the bank and for a period of time afterwards.
Yes, though not termed “water banking.” There are already a few informal efforts around Utah that are similar to water banking. The legislation would not affect those efforts. It would, however, create a 10-year pilot program that would establish a statutory framework. The framework would give water right holders the option of creating and operating their own water banks. The banks would be subject to public notice and comment, oversight from the Board of Water Resources and coordination with the State Engineer.
How would a water right holder be protected from abandonment and forfeiture when putting water into a bank?
Water right holders would retain ownership of their water rights. The rights would revert to their prior “heretofore” use when withdrawn from the bank without the need for a change application. Water rights deposited within a bank would also not be subject to abandonment and forfeiture for the period of time the State Engineer authorizes them to be used within a bank.
The decision to create, or participate in, a water bank would be entirely voluntary and would be made at the local level. The banks would be locally managed. Only a record holder of a perfected water right may request approval for a statutory water bank and designate the service area of a water bank. No banks would be managed at the state level.
- Many water users already have leases arranged by contract.
- A contract water bank would apply in those cases or where a review of local conditions shows the desired water market activity is best managed through a contract.
- A contract water bank seeks approval to utilize a specific water transfer contract consistent with the terms of a water bank and with the flexibility provided by the act.
- A contract water bank application asks water users to submit general information about the contract and a copy of the contract.
- The applicant for a contract water bank must be a non-federal public entity to prevent private water speculation: other parties to the contract do not need to be public entities.
- A statutory bank is a legal entity organized for the purpose of administering leasing activity between parties in a defined area.
- Statutory water banks are modeled after private irrigation companies and run on private governance documents such as articles, bylaws, and policy documents.
- A statutory water bank seeks approval to develop new and unspecified water lease agreements under a locally managed water bank.
- A statutory water bank application requires that the applicant demonstrate they have addressed a number issues needed for prudent management and leasing of water.
- The applicant of a statutory bank must be the owner of a perfected water right and participation is open to all interested water users.
No. Water right holders seeking to move a water right into a bank would go through the same change application process that applies to all water rights. This means the State Engineer would review all applications that seek to place a water right into a bank to ensure that they do not impair other rights. It also means that the existing limitations on out-of-basin transfers would apply.
After the State Engineer approves a right for use within a bank, the right could be used for a specified period of time within the bank’s service area for other uses without the need for another change application. This, of course, would be subject to any limitations imposed by the State Engineer.
As a pilot program, every bank would submit an annual report to the Board of Water Resources. At the end of the pilot program, the board would report on the effectiveness of the water banking program to the Legislature. The Legislature would then determine whether to continue the program, modify it, or allow it to terminate.
Because this program is intended to be a pilot program, the draft legislation is intended to keep it as simple as possible to limit the potential for unintended consequences and to make it easier to study the effectiveness of the program.
Water Bank Application:
Interested water users can apply to the Utah Board of Water Resources to have qualifying leasing arrangements be approved as a “Water Bank.” The approval process includes a public hearing and applications are approved when deemed complete and in conformance with the act. Contact Emily at @firstname.lastname@example.org
If you have questions, or are interested in more information regarding water marketing and the Water Banking Act, please send an email to WaterMarketing@utah.gov.